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Bitcoin hit a fresh 10-month high of $8,335 on Bitstamp earlier today and is currently reporting its largest monthly gain since November 2017.

A bearish divergence of the hourly chart relative strength index and overbought conditions signaled by longer-duration RSIs indicate scope for a pullback to $7,400.

A rally to $8,500 could be seen in the U.S. trading hours if BTC invalidates the above bearish chart pattern with a move over $8,335.

Bitcoin (BTC) clocked fresh 10-month highs earlier today and currently appears on track to post its largest monthly gain since late 2017.

The cryptocurrency market leader rose to $8,335 at 08:00 UTC on Tuesday, the highest level since July 25, according to Bitstamp prices.

As of writing, BTC dropped back slightly to $8,000, but that still represents 51.5 percent gains on the monthly opening price of $5,267.

It is worth noting that the last time the cryptocurrency chalked up over 50 percent monthly gains was during the height of the bull market in 2017. Prices rallied 54 percent in November 2017 on speculation that the launch of BTC futures on major U.S. derivative exchanges would open the doors to institutional money in the crypto space.

So, as long as prices close May above $7,350, the monthly gain would be the highest since November 2017.

Monthly chart

As seen above, BTC rallied by 65.78 percent and 54.6 percent in August and November 2017, respectively.

The month-to-date gains seen at press time are the highest since November 2017. The monthly gain, however, would be the biggest since August 2018 if the price settles above $8,150 on May 31.

If BTC ends May below $7,347, the monthly gain would be the highest since December 2018, when prices rallied 39.5 percent.

With long-term technical studies biased bullish, the cryptocurrency looks set to post its best monthly gain since August 2017.

The recent rally, however, is looking overstretched on the short-term charts. So, a price pullback and a monthly close below $7,347 cannot be ruled out.

Daily, weekly and 3-day charts

As can be seen (above left), the 14-day relative strength index (RSI) is reporting overbought conditions with an above-80 reading. The RSIs on both the weekly and 3-day charts (above right) are also flashing similar signals.

As a result, the cryptocurrency may have a tough time scaling the immediate resistance at $8,500 (July 2018 high) in the short-term.

It is worth noting that many in the investor community, including Fundstrat’s Tom Lee, have associated the recent rally with the Consensus 2019 conference in New York, which kicked off on Monday. BTC, therefore, could witness a “sell the fact” pullback following the conclusion of Blockchain Week.

As for the next 24 hours, the cryptocurrency could fall back to lows near $7,450, according to the hourly chart below.

Hourly chart

BTC has created a bearish engulfing candle and the RSI has created lower highs as opposed to higher highs on the price.

That bearish divergence indicates that bullish momentum has weakened and a price pullback could be in the offing, possibly to the 50-hour moving average (MA), currently located at $7,448.

The bearish divergence, however, would be invalidated if the price rises above $8,335. In that case, the cryptocurrency will likely challenge $8,500.

Disclosure: The author holds no cryptocurrency assets at the time of writing.